Finance Blog

Red Flags: Signs You May Have a Dud of a Financial Planner

Written by Jeff Rose on March 19, 2013 in Retirement  |   No comments

Taking financial advice from someone takes a lot of trust—trust you shouldn’t give someone just because he or she has a business degree. There are plenty of financial planners that don’t make the grade. These red flags will help you decide whether you can trust your planner…

financial planner red flag warningTaking financial advice from someone takes a lot of trust—trust you shouldn’t give someone just because he or she has a business degree. There are plenty of financial planners that don’t make the grade. These red flags will help you decide whether you can trust your planner or whether it’s time to move on to someone else for your financial planning advice.

Red flag: She won’t discuss her payment structure.

Financial planners get paid in various ways. Some of them get paid commissions on the financial products that they sell clients, some only get paid from the fees that they charge you, and others get paid according to a combination of commissions and fees.

Each of these approaches has benefits, but each also has negative aspects. What matters most is that your financial planner feels comfortable discussing how she gets paid. After all, her salary is coming from the money you pay for services and plans. It’s your right as a client to know how that money gets used.

Red flag: He gives you guarantees he can’t possibly control.

A good financial planner can help you make educated choices that will help your money grow. No matter how good he is, though, he cannot guarantee that your investments will yield specific results.

All investments involve risk. Some benefit from dramatically lower levels of risk, but you’re still placing a bet with any investment. If your financial planner says that he can guarantee a return on your investment, then he’s either lying or he doesn’t know what he’s talking about. Regardless, it’s time to move on.

Red flag: She wants you to recruit other investors.

Your financial planner has an unbelievable deal lined up that could make you millions of dollars in months. To make the most of the opportunity, though, she says you’ll need to recruit other people to invest. The more people you recruit, the more money you stand to make.

If you hear a pitch that sounds even remotely like this, head for the door. Chances are that your financial planner is involved in a Ponzi scheme. Ponzi schemes need constant streams of new investors to keep money flowing upward to people who joined the deal earlier. People often think that they’re making a ton of money—until they find out that it’s all an illusion. Ponzi schemes are also illegal, and participating could lead to jail time and huge fines.

Red flag: He doesn’t have independent certification.

Any company can hire someone, give him a little training, and call him a financial planner. Often, this employee only knows how to sell the products that the company wants to push. It’s not that the financial planner wants to cheat you. He might have your best interest at heart. Unfortunately, he doesn’t know enough to make good decisions that will meet your short-term and long-term goals.

Look for planners with degrees such as a CFP or CPA-PFS. People with these degrees are overseen by regulatory organizations. Plus, they should know a lot more about advanced economics and investment strategies.

Jeff Rose is a Certified Financial Planner who writes about financial planning topics at Good Financial Cents. His latest project, The Debt Movement, aims to help people pay off $10,000,000 of debt in 90 days. You can join the movement and get a chance to earn some of the $10,000 debt scholarship money by visiting DebtMovement.com.

No comments yet

Leave a Comment

Name :

Commenting guidelines

We welcome your interest and participation on this forum, but be aware that comments will be published at Equifax's sole discretion. Please don't use this blog to submit questions or concerns about your Equifax credit report or raise customer service issues. Instead, you should contact Equifax directly for all such matters and any attempts to do so in this forum will be promptly re-directed.

Some other factors to consider when commenting:
  1. Registration and privacy. While no registration is required to visit our forum, participants wishing to post a message must register by creating an account. All personal information provided by forum members incident to registration is governed by our Terms of Use and Privacy Policy.
  2. All comments are anonymous. We'll delete your name, e-mail address, and any other identifying information, including details about your investments.
  3. We can't post or respond to every comment - As much as we'd like to, we can't post every comment, nor can we guarantee that we will respond to each individual message. All questions or comments about your Equifax credit report or similar customer service issues should be handled by contacting Equifax directly.
  4. Don't offer specific legal, tax or financial advice. All of the materials on this Site are for information, education, and noncommercial purposes only and this forum is not intended as a means of expressing views or ideas regarding any specific legal, tax, or investment advice. While offering general rules of thumb is both permitted and encouraged, recommending specific ideas or strategies regarding investments, taxes, and related matters is prohibited.
  5. Credit Repair. This blog is not intended as a venue for the discussion or exchange of ideas regarding credit repair or other strategies intended to assist visitors and community members improve or otherwise modify their credit histories, ratings or scores.
  6. Stay on topic. Your comment should be concise and pertain to the specific post in question.
  7. Be respectful of the community. The use of profanity, offensive language, spam, and personal attacks will not be tolerated and egregious or repeat offenders will be banned from future participation. We encourage disagreement and healthy debate, but please refrain from personal attacks on our WordPresss and contributors.
  8. Finally: Participation in this forum may be terminated by Equifax immediately and without notice for failure to comply with any guidelines or Terms of Use. As such, you should familiarize yourself with all pertinent requirements prior to submitting any response through the blog or otherwise. All opinions expressed in this forum are solely those of the individual submitting the comment, and don't necessarily represent the views of Equifax or its management.

Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.

Retirement Archive

Stay Informed Sign up for our FREE Equifax email Newsletter